Percikan pikiran seorang ekonom.

Indonesia Needs Strong Public Institutions, Not Strongmen

Bloomsberg Editors

14 July 2014

In the end, Indonesia’s presidential elections turned on a single unhelpful question: Was Joko Widodo “strong” enough to lead the fourth-largest nation in the world?

Enough doubts were raised about Widodo, the popular and unassuming Jakarta governor, to make last week’s vote a cliffhanger. But with his victory expected to be officially confirmed next week, Indonesians should judge their next president not by some vague measure of toughness but on his practical ability to build strong institutions.

Former dictator Suharto popularised the idea that only an iron hand could hold together diverse, fissiparous Indonesia, with its 17,000 islands and nearly 250 million citizens. Yet, since Suharto stepped down in 1998, the once omnipotent Indonesian military has largely withdrawn from politics and business. Power has devolved from Jakarta to provinces and districts. And the country arguably faces fewer rather than more separatist pressures. Aided by the global commodity boom and the easy-money policies of the US Federal Reserve, the Indonesian economy grew at a healthy clip between 2003 and 2011.

True, indecisiveness has marred the last few years under President Susilo Bambang Yudhoyono. Growth has slowed to about five per cent, not nearly enough to lift the country out of a middle-income trap. Indonesia’s political system, in which a directly elected president must haggle with a fractious and combative parliament, is easily paralysed and prone to rent seeking. Roads and ports are decrepit. Around half the revenue distributed to the provinces is spent on salaries rather than schools; in many places, much of the rest is siphoned off.

There is no shortage of ideas to improve Indonesia’s economy, infrastructure and educational system. The challenge is implementation. Right now, for instance, ministries have vast leeway to interpret and implement laws. That encourages backroom deal making and cronyism, not to mention confusion as different ministers pursue different agendas. An entrenched and change-resistant bureaucracy further stymies reforms. And the central government has little control over local officials, who are responsible for the bulk of spending on services such as education and health care.

Combination image shows Indonesian presidential candidate Prabowo Subianto in Jakarta on May 20, 2014 (left) and opponent Joko ‘Jokowi’ Widodo at a P-DIP party campaign in Jakarta on March 16, 2014. — Reuters picCombination image shows Indonesian presidential candidate Prabowo Subianto in Jakarta on May 20, 2014 (left) and opponent Joko ‘Jokowi’ Widodo at a P-DIP party campaign in Jakarta on March 16, 2014. — Reuters pic

A strong leader can make some difference. Creating a centralised policy-making body, led by the president, to vet new initiatives and regulations would impose some order and transparency on the reform process. More important, it would reduce the scope for individual discretion — and hence the temptation for taking bribes.

As Widodo showed in running Jakarta, though, only broad and systemic changes can begin to break down the institutional resistance to reform. Appointments and promotions within the bureaucracy need to be made more meritocratic and accountable. Where technology can reduce or eliminate the role of individual functionaries — in tax collection or the issuing of business licenses, for instance — it should be speedily deployed.

In today’s Indonesia, as in any other complex democracy, the most effective leaders are salesmen, not strongmen. Wide public support allowed Widodo to push through difficult institutional reforms while serving as Jakarta governor. As president, he must convince ordinary Indonesians that sacrifices now — most important, eliminating US$21 billion (RM66.9 billion) in fuel subsidies — will pay dividends later. Only with their support will he be able to start pulling down the imposing roadblocks to change.


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